Israel has agreed to transfer in full hundreds of millions of dollars in taxes collected for the Palestinian Authority but frozen in a row over the International Criminal Court (ICC), the Palestinian president said.

Mahmoud Abbas said that: "There is an agreement; the money will be sent in full.''

Israeli officials on Saturday confirmed an agreement was sealed on the taxes, while the media said the transfer of $459m (1.8 billion shekels) would take place on Monday.

Israel froze the tax transfers as punishment in January, after the Palestinians applied to join the International Criminal Court - a step that could pave the way for possible war crimes charges against Israel.

Israeli Prime Minister Benjamin Netanyahu announced after his re-election last month that the transfers would resume as a humanitarian gesture.

The UN special coordinator for Middle East peace efforts, Nickolay Mladenov, welcomed the deal as an important step "in the right direction".

The Palestinians had threatened to turn to the International Criminal Court over Israel's decision in early January to retain the taxes in retaliation for the Palestinians joining the ICC.

Israel agreed at the start of April to release the funds after deducting debts due for electricity, water and medical services, a proposal rejected by the Palestinians who insisted on full payment.

Palestinian Prime Minister Rami Hamdallah said the PA, once the funds are received, will first pay the April salaries of its 180,000 employees, who have been receiving only 60 percent of their wages since December.

The deficit will also be paid "as soon as possible", Hamdallah said.

Under an economic agreement signed in 1994, Israel transfers to the PA tens of millions of dollars each month in customs duties levied on goods destined for Palestinian markets that transit through Israeli ports.

Although transfer freezes have been imposed many times, they have rarely lasted more than one or two months, except in 2006 when Hamas won a landslide victory in Palestinian legislative polls and Israel withheld the funds for six months.